When “Raise the Wage” Backfired
Welcome to the rise of the machines.
Rewind to a few months ago when we reported that McDonald’s appeared to be testing touchscreen ordering devices:
McDonald’s employees who picketed for a better living wage (whatever that means) may come to regret that decision. According to a Redditor, a McDonald’s in Illinois replaced their cashiers with machines. The machines appear to be the cousins of the ones found in grocery stores, big box stores, and CVS that allow customers to complete transactions.
It turns out McDonald’s is no longer merely testing the devices but is planning widespread implementation. Tanking profits are forcing fast food chains like McDonald’s to reconsider how much their front line employees are worth, particularly when these employees continue to demand more money.
According to the Wall Street Journal (emphasis added):
If there’s a silver lining for McDonald’s in Tuesday’s dreadful earnings report, it is that perhaps union activists will begin to understand that the fast-food chain cannot solve the problems of the Obama economy. The world’s largest restaurant company reported a 30% decline in quarterly profits on a 5% drop in revenues. Problems under the golden arches were global—sales were weak in China, Europe and the United States.
So even one of the world’s most ubiquitous consumer brands cannot print money at its pleasure. This may be news to liberal pressure groups that have lately been demanding that government order the chain known for cheap food to somehow pay higher wages.
The McDonald’s earnings report on Tuesday gave a hint at how the fast-food chain really plans to respond to its wage and profit pressure—automate. As many contributors to these pages have warned, forcing businesses to pay people out of proportion to the profits they generate will provide those businesses with a greater incentive to replace employees with machines.
Enter the machine:
By the third quarter of next year, McDonald’s plans to introduce new technology in some markets “to make it easier for customers to order and pay for food digitally and to give people the ability to customize their orders,” reports the Journal. Mr. Thompson, the CEO, said Tuesday that customers “want to personalize their meals” and “to enjoy eating in a contemporary, inviting atmosphere. And they want choices in how they order, choices in what they order and how they’re served.”
As the Wall Street Journal and many others have pointed out, entry level burger-flipping jobs are not intended to be long-term, family-supporting endeavors. Yet the Raise the Wagers love to use low-wage earners as political pawns to target those with successful careers and businesses.
Next News Network has the breakdown:
Even more problematic for the “Raise the Wage” crowd is that the automation trend is not limited to fast food chains.
Lowe’s hardware store has developed a fleet of robots to assist customers.
Meet the OSHbot. OSHbot isn’t quite as cute as WALL-E, but we’ll forgive it for that.
The OSHbot is designed to assist customers locate items they need. Looking for hammers? OSHbot will take you there. Need a particular nail? Place the nail in front of OSHbot’s viewfinder and it will show you where you can find it. No hablas Inglés? No problema! OSHbot is also multilingual.
OSHbot will go live at an Orchard Supply Hardware store in San Jose, California in the near future.
As more retailers respond to minimum wage demands by replacing workers with technology, we can’t help but wonder where unions will turn for their next anti-capitalistic scape goat.
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Comments
I for one welcome our new robot overlords.
Too soon?
And I for one would rather order by touchscreen than pay $15 for a burger and diet coke, the same way I’d rather get money from an ATM than wait in line for a bank teller, or scan and check out my own groceries rather than wait in line for a check-out clerk. Contrary to what the libs think, businesses are in business to provide something the public wants in exchange for money, not to support a bunch of losers who won’t try to get themselves out of a minimum wage job.
The first time I went to Food For Less and learned that I was expected to bag my own groceries, well, that was my last visit there. I did not go to college and law school so that I can bag my own groceries!
I’d rather pay a little more at Gelsons or Whole Foods for (1) decent service and (2) a different set of customers.
And the genius of the market is in providing you the choiceSSSS you have in where to buy something as fundamental as groceries.
You have motivated, imaginative people working hard to find your slightest preference, just so you will bring your custom to their store.
What a WONDERFUL, amazing system…!!!
Yeah, sure, it works in practice, but how well does it do in theory?
“I’d rather pay a little more at Gelsons or Whole Foods for (1) decent service and (2) a different set of customers.”
Well aren’t you just special. I bet your mommy still tucks you in at night, makes sure you haven’t been touched by real people germs, and irons your underwear for you.
Eh, the way I see it, it’s a “So leave and we’ll both be happy” sichiation…
Can you say “Pajama Boy”?
Guess what. Enough people think like that and they will make bagging robots.
And they will still crush your bread and eggs.
I too went to law school, but also picked up an MBA somewhere along the way.
Part of this is that time has a different value to different people. In a large firm, you will be typically be earning $50 on up to many hundreds an hour for each hour that you bill and collect. So, if a successful attorney has the choice of billing an hour of work, or spending it doing any number of overhead activities, ranging from picking up laundry to standing in line, the rational decision is probably to pay to have things done. But, most people haven’t been to law school (maybe 1% of the population). Ditto for medical school, dental school, etc. Far more likely to be making $10 an hour, or maybe even less (your hourly cost is closer to zero if you are not working). For them, standing in line to save money, etc, often makes economic sense.
Despite being an attorney, and supposedly above this sort of thing, I do watch prices fairly closely at fast food places. For me there are the bottom tier (Arby’s, Sonic), where quality of food is low enough I won’t eat there for any price. Middle tier (McDonalds, Burger King, Carl Jr) where I am quite price conscious. And a higher tier (Wendy’s and maybe Carl Jr) where price is less so (mostly because they have unique stuff the wife wants, and so money isn’t an object). McDonalds now gets the bulk of my business because of its $1 any size drinks. I like BK burgers better, but tend towards chicken these days. But BK was running a 10 chicken nuggets for $1.50 special, and so went there the other day, despite having to spend over $2 for the large drink (Most McDonalds in this part of the country continue to offer 20 chicken nuggets for $5).
Point of this latter is that a lot of people are fairly price conscious at this point in the market. If one chain raises their prices a bit, business will move to the chains that didn’t. Maybe the added prices will cover the lost volume. And maybe not. They are constantly jockeying for position here, while trying to find something unique that brings in repeat customers, despite a higher price (like chili and baked potatoes for us from Wendy’s). And, if they all raise their prices (e.g. In response to raising. the minimum wage, widespread unionization, etc), some/many will forgo this luxury. Or willingly deal with a kiosk than a human to save money (even ignoring the accuracy problem – back in CO, I routinely had to deal with Chinese as first language workers in the front, Spanish as first language supervisors, all trying to understand those of us who only speak English).
Most grocery store automated checkout scanners are dog-slow, cumbersome to use, and not at all convenient. Human checkers are 5X faster, so unless I have only a few items and can afford to waste time, I steer clear of the self-checkout stuff.
But groceries may be a special case. A checker recognizes all the different fruits and produce items (which sometimes cannot be UPC-coded), and the self-checkout runs me through a painfully-slow picture menu.
I don’t know about that, but I welcome THEIR new robot overlords^^^^^^^^replacements.
Jack in the Box is already using them in CA. They seem to work fine, and “special orders” don’t get messed up.
Smart thinking young people who want to be employed would get the skills necessary to make and/or fix these machines. They are here to stay.
The right skills for these would consist of Computer Science and Computer Information Systems. An Associates in Computer Information Systems with a strong Programming and Hardware background will be best.
The Nerds win again.
This comment makes me want to go back and read Player Piano by Vonnegut. It has been years, but I think the only jobs in the future were join the army, public works (fixing potholes) or repair the machines that replaced all of us. Written 62 years ago.
Chili’s already has touch-screen tablets to pay for drinks, happy hour or dessert at their restaurants.
Outback Steakhouse is planning on offering something similar too. And you can order Chilis-to-go from your smartphone. Taco Bell has just introduced smartphone ordering & paying too. Heck, even my local Publix has an app for pre-ordering deli items and subs. It’s both about consumer convenience, and minimizing counter staff.
Now, the question is not a matter of “If?” but “When?”
As in, “When are the union thugs going to start using bats and two-by-fours on these machines?”
Hey, expect that. The Luddites of old did exactly the same thing.
And so, once again political leftists created a crisis-that-isn’t to create ‘victims’ they exploit for their own political goals, even to the detriment of the ‘victims’ they are ‘fighting for’.
Useful idiots shouldn’t expect more than minimum wage.
But, really, can ANYBODY pretend that the Collective does NOT WANT a larger dependent class and a smaller middle class?
We know it from the writing of their “thinkers”. They LOATH the middle class, and have historically.
They know perfectly well that their programs and policies throw people out of work, and they have ceased really trying to pretend otherwise. That’s why we see new Orwellian terms like “job-lock”, which, when you break it (become unemployed) is supposed to be DoublePlusGood.
i’m hoping the city of Lost Angels will follow through with the mayor’s idiotic plan to raise the minimum wage here, even before the idiots in Sacto do.
i figure that, after they automate what they can, the owners might be more inclined to hire a middle aged American with w*rk skills & initiative, rather than just another illegal alien.
who knows? maybe we’ll start having restaurants where the staff speaks english, like they did when i was a kid.
The robots will be fluent in over six million languages.
And specialize in human-cyborg relations.
Ding! We have a winner!
McDonald’s cheap food?
Of the fast food places I know McD is the most expensive. ( I don’t do the King though. )
Who is cheaper? Not BK, Wendy’s, Arby’s or Hardee’s.
Actually in Chicago Wendy’s and Arby’s are both cheaper. Like I said I don’t know about BK. Don’t think I’ve ever tried Hardee’s.
Hell there are at least three Italian Beed chains, and they are cheaper too.
Go to Five Guys Burgers and Fries, but unless you’ve been banned from an all you can eat place do not order the large fries. More expensive but no frozen patties, no frozen fries, no freezers.
Do you think these robots will drop out of high school, squirt out a half dozen baby robots and then demand a “living wage” for menial work? And if so, will they be reliable Democrat voters?
Machines are already voting Democrat in Maryland.
Ha!
nice one
I’ll have fries with that, HAL.
“I’m sorry, Dave. I’m afraid I can’t do that.”
Dai-sy, dai-sy…
Let’s not forget that when everyone is unemployed, we’ll finally have achieved equal pay for equal work.
This is just so much raw meat for the idiots who think corporations do no wrong. McDonalds was going to use these no matter what their employees make. They just like to link this BS in their press releases so really dumb people can salivate on command.
I worked at a medical device company. We got this same crap all the time about the Obamacare device tax. We were urged to write our congressmen and every layoff press release talked about the tax even though it wasn’t in effect yet. We had a profit margin of 80%. How lowering that to 77% would cause any company to stop production is something only an idiot would understand
Past tense, huh? Sounds like you’re both better off.
“They just like to link this BS in their press releases so really dumb people can salivate on command.”
Can someone get you a towel…???
“We had a profit margin of 80%.”
No. “You” did not. Nor could the company have.
This confirms you are an economic ignoramus.
On the actual device being sold yes. The company does have other overhead like R&D, patient tracking and costs that eat into those profits. However the total labor and material cost of the device in 20% of what it is sold for. So anybody arguing that a small tax is shutting down production is a fool.
You people are so dumb you latch onto anything some businessman says and think it must be true since businessmen never lie.
Nice little mob of straw men you have there.
Please do point us to the SEC filings of said company with 78% profit margins.
I call BS on this. You are confusing the gross margin with profit. Zimmer just reported profit margins of 15%. Medtronic was 20%, Stryker was 2%. Respectable, but nothing earth-shattering.
Apple and Facebook were 20 and 25%.
And of course you would also need to consider the Return-on-Capital which measures cash flow relative to the capital invested in the business.
A highly capital intensive business needs to generate a lot of cash in order to provide an adequate level of pay-back to it’s investors. Otherwise they will put their money elsewhere to maximize it’s utility. Amazingly, if left to their own devices, people with a (gasp!) profit motive will make these decisions more efficiently than a centralized planner! History and SCIENCE! tell us this is ALWAYS true.
And by “investors” I mean people who take their own, hard-earned money and put it into a business. Not politicians who confiscate our money and then piss it away and call it an “investment.”
I call BS on your stupidity. Where did I say anything other than the profit on a device is 80%. You are the people inventing all sorts of star men because you can’t face the fact that businesses lie all the time when they make claims about taxes, wages, and regulations.
It sounds like the actual burger-flipping jobs are still safe from the menace of the Robot Cashiers.
Only for the moment. McDonalds has also been toying around with automated production lines for the food. The actual individual acts are reasonably easy to automate (cooking, moving items to station) It’s the sequence and packaging which is giving them heartburn (robotic controls, for all their benefits, just don’t her have the speed, accuracy and balance to correct when something isn’t quite perfect).
The article cites “burger-flipping jobs”, but the automation plans discussed have nothing to do with the burger-flipping side of the operation.
Installing automatic ordering/cashier machines is a far less ambitious project than installing food-handling machinery, which must be easily cleanable. Perhaps paradoxically, cleaning tends to be a very messy operation when automatic machinery is involved.
McDonald’s is already doing this in Europe. They have kiosks in malls where they have an outlet, and some other places, or you can order and pay on your smart phone and even get notified when your order is ready.
They and other fast food chains are developing robotic cooking now. Humans will put the food into the machine and take it out, but have no role in the cooking part at all, making all burgers and fries identical.
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Unions are an anachronism now. For more than 50 years, they have been concentrating on extorting more wages and benefits, not merely fighting for safe and decent working conditions.
This is not your father’s UAW or Teamsters, and your grandfather would be appalled that SEIU even exists.
When they can bring a Hardee’s Fried Bologna and Velveeta Cheese Breakfast Combo to my office door by commercial drone, call me.